Sadruddin Tejani vs. ITO (Bombay High Court)

COURT:
CORAM: ,
SECTION(S):
GENRE:
CATCH WORDS:
COUNSEL: , ,
DATE: April 9, 2021 (Date of pronouncement)
DATE: April 14, 2021 (Date of publication)
AY: -
FILE: Click here to download the file in pdf format
CITATION:
The DTVSV Act, 2020 is an Act to provide for resolution of disputed tax and matters connected therewith or incidental thereto. The emphasis is on disputed tax and not on disputed income. From a plain reading of the provisions of the DTVSV Act, 2020 and the Rules set out above, it emerges that the Designated Authority would have to issue Form 3 as referred to in section 5(1) specifying the amount payable in accordance with section 3 of the DTVSV Act. In the case of the declarant who is an eligible appellant not falling under section 4(6) nor within the exceptions in section 9 of the DTVSV Act, 2020, which fact appears to be undisputed

DTVSV Act, 2020

S. 4(1): Declaration –The Designated Authority cannot reject the declaration filed under section 4(1) of the DTVSV Act,unless thedeclarant’s case does not fall under section 4(6) (False )  and in any of the disqualifications mentioned in section 9 of the said Act ( Act not to apply in certain cases .) -Order of rejection was quashed . [ S.154,  264 Art , 226  ]

SadruddinTejani vs. ITO Circle  [WP No: 611, 606, 626, 590, 612, 601, 638, 593, 592,596, 625 of 2021]Order dated 09.04.2021  )(Bom) HC )

The Hon’ble High Court directed the Designated Authority to act upon the declaration of the Petitioner in Form 1 as per law within a period of two weeks.   

Honourable Justice  Mr . Sunil .P. Deshmukh  &       Honourable Justice  Mr. Abhay  Ahuja
Mr .K. Gopal  with  Ms. Neha Paranjape Advocates for the Petitioners
Mr . Sham Valve Advocate for the Respondents 

Petitioners filed eleven writ petitions challenged the arbitrary and unreasonable action of the Pr. CIT [Designated Authority] of rejecting the declaration filed under section 4(1) of the Direct Tax Vivad Se Vishwas Act, 2020 [DTVSV Act] for the AYs 1988-89 to 1998-99 with the remark as ‘Rejected’ without giving any justification for the same.

Facts:

The Petitioner is an Individual and had filed return of income for the AY 1987-88 to 1998-99. The assessments for the AY 1987-88 to 1995-96 were reopened u/s 147 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] and the assessment orders were passed u/s 143(3) r.w.s 147 of the Act. For the AYs 1996-97 to 1998-99, the assessments were finalised u/s 143(3) of the Act by raising substantial demand. The additions made in the said assessments were challenged in appeals before CIT(A), who confirmed the action of the AO. Further, the appeal was preferred before ITAT contesting the additions confirmed in the appellate proceedings. The ITAT set aside the order of CIT(A) and directed the AO to grant relief.

Pending the appellate proceedings, the TRO initiated the recovery proceedings and the Petitioner to avoid any coercive action handed over the cheques totalling to an amount of Rs.12,43,000/- against the demand raised for the AYs 1986-87 to 1998-99. However, while preparing the challans, the TRO wrongly mentioned only AY 1986-87 in all the challans and adjusted the said amount only against the demand for AY 1986-87 and not for the AYs 1987-88 to 1998-99.

After the ITAT order, when the AO gave effect to the same, the demand for all the assessment years had substantially reduced. But, the credit for the taxes recovered was given only in the AY 1987-88, which resulted into refund in theAY 1987-88. Consequently, huge tax and interest demand was created in all the other years i.e AY 1988-1989 to 1998-99.

Thus, the Petitioner sought rectification of the same by moving an application u/s 154 of the Act. However, the same was rejected.The Petitioner therefore, moved an application u/s 264 of the Act for all the AYs 1987-88 to 1998-99.
Pending the application u/s 264 of the Act, the Petitioner preferred to settle the litigation under DTVSV Act, 2020. On filing the declaration u/s 4(1) of DTVSV Act, 2020, the Petitioner was asked to justify his claim that there is a ‘disputed tax’ when there is no ‘disputed income’ as per the relief sought in the applications filed u/s 264 of the Act. The Petitioner responded to the same and submitted that as per section 2 (1)(a)(v), an assessee whose application is pending on the specified date is an ‘appellant’ for the purpose of DTVSV Act, 2020. The disputed tax in such cases is defined in section 2(1)(j)(F) as the amount of tax payable by the appellant, if such application for revision was not accepted. In the Petitioner’s case there are ‘tax arrears’ as per the definition in section 2(1)(o) of the DTVSV Act, 2020. Thus, the Petitioner determined the amount payable u/s 3(a) of DTVSV Act, 2020. The Designated Authority did not appreciate the said explanation of the Petitioner and rejected the declaration without assigning any reason for the same.

Contention before Hon’ble High Court:

Before Hon’ble High Court, the Petitioner challenged the arbitrary and unreasonable action of the Designated Authority (Respondent No.2) in rejecting the declarationfiled under the DTVSV Act. It was argued before the Hon’ble High Court that thePetitioner’s case doesn’t fall under any of the disqualifications mentioned in section 9 of the DTVSV Act, 2020 and therefore, the Designated Authority has no power to reject the application without assigning any reason for the same. It was submitted before the Hon’ble Court that the Petitioner has satisfied all the conditions to make the declaration under the DTVSV Act, 2020 and therefore, he is eligible to seek all the benefits under the said Act. On the other hand, the department argued that the declaration of the Petitioner is not valid as there cannot be any disputed tax in the absence of any disputed income. Thus, the declaration of the Petitioner has been rightly rejected.

Held:

The Hon’ble High Court in paragraph 38, observed that the DTVSV Act, 2020 is an Act to provide for resolution of disputed tax and matters connected therewith or incidental thereto. The emphasis is on disputed tax and not on disputed income. It was further, held in paragraph 50 of the decision that “from a plain reading of the provisions of the DTVSV Act, 2020 and the Rules set out above, it emerges that the Respondent – Designated Authority would have to issue Form 3 as referred to in section 5(1) specifying the amount payable in accordance with section 3 of the DTVSV Act. In the case of the declarant who is an eligible appellant not falling under section 4(6) nor within the exceptions in section 9 of the DTVSV Act, 2020, which fact appears to be undisputed”.

The Hon’ble Court further held that as the Petitioner’s case is covered by the definition of disputed tax as per section 2(1)(j)(F) of the DTVSV Act, 2020, the Designated Authority is not justified in rejecting the declaration of the Petitioner.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.611 OF 2021
WITH
WRIT PETITION NO.606 OF 2021
WITH
WRIT PETITION NO.626 OF 2021
WITH
WRIT PETITION NO.590 OF 2021
WITH
WRIT PETITION NO.612 OF 2021
WITH
WRIT PETITION NO.601 OF 2021
WITH
WRIT PETITION NO.638 OF 2021
WITH
WRIT PETITION NO.593 OF 2021
WITH
WRIT PETITION NO.592 OF 2021
WITH
WRIT PETITION NO.596 OF 2021
WITH
WRIT PETITION NO.625 OF 2021
Sadruddin Tejani ]
L-143, Maker Tower, ]
J D Somani Road, Cuffe Parade, ]
Mumbai 400 005. ] .. Petitioner.
v/s.
1 Income Tax Officer – Circle 17(3) ]
(1), having office at Kautilya Bhavan,]
Bandra. ]
2 Principal Commissioner of Income ]
Tax 17 (Designated Authority under ]
Direct Tax Vivad se Vishwas Act, ]
2020) having office at Room No.127, ]
Kautilya Bhavan, Bandra. ] .. Respondents.
Mr. K. Gopal with Ms. Neha Paranjape, Advocate for the Petitioner in all
the Petitions.
Mr. Sham Walve, for the Respondent in all the Petitions.
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CORAM: SUNIL P. DESHMUKH &
ABHAY AHUJA, JJ.
RESERVED ON : 17th MARCH, 2021.
PRONOUNCED ON : 09th APRIL, 2021.
PER COURT:-
By these Petitions filed under Article 226 of the Constitution
of India, 1950, Petitioner is challenging the rejection of its declarations
filed on 18th November, 2020 under Section 4(1) of the Direct Tax Vivad-
Se-Vishwas Act, 2020 (“DTVSV” Act) for the eleven Assessment Years from
A.Y. 1988-89 to 1998-99.
2 Petitioner has filed these Petitions for the following reliefs :-
“(a) That this Hon’ble Court may be pleased to issue under Article
226 of the Constitution of India an appropriate direction order or a
writ including a writ in the nature of ‘Certiorari’ to call for the
records and verify the declaration filed under section 4(1) of the
DTVSV Act and direct the Respondent No.2 to accept the same;
(b) That the Hon’ble Court may be pleased to issue under Article
226 of the Constitution of India appropriate writ or order or
direction including a writ in the nature of ‘Mandamus’ directing the
Respondent No.2 to accept the declaration made by the Petitioner
on 18th November, 2020 under section 4(1) of the DTVSV Act;
(c) That this Hon’ble Court may be pleased to issue under Article
226 of the Constitution of India an appropriate writ or order or
direction including a writ in the nature of ‘Prohibition’ restraining
the Respondent No.2 disposing off the application filed under
section 264 of the Act and recover the outstanding disputed
demand thereunder”.
3 A sojourn into the facts will be helpful to appreciate the
controversy. Petitioner who is stated to be engaged in the business of retail
footwear under the shop name “Jolly Shoes”, has filed declarations in
Form-1 and undertaking in Form-2 in respect of each of the Assessment
Year from 1988-89 to 1997-98 under Section 4 (1) of the DTVSV Act on
18th November, 2020. However, the same has been rejected by updating
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the status on the e-filing portal of the Petitioner on 30th January, 2021,
which shows the action on the DTVSV Forms filed by the Petitioner from
Assessment Year 1988-89 to 1997-98 as “Rejected”. Aggrieved by the
same, Petitioner is before us.
4 Petitioner had earlier filed returns of income for the
Assessment Years 1987-88 to 1998-99. Assessments for the Assessment
years 1987-88 to 1995-96 were reopened by issuance of notices under
Section 148 (1) of the Income Tax Act, 1961 (the Income Tax Act) and the
re-assessment proceedings were completed by passing of Assessment
Orders under Section 144 read with Section 147 of the Income Tax Act by
making additions on account of gross profit and unsecured loan. For the
Assessment Years 1996-97 to 1998-99, assessments were finalized under
Section 143(3) of the Income Tax Act. Pursuant to the said Assessment
Orders, Respondent No.1 raised following demands for those years by
issuing notice under Section 156 of the Income Tax Act:-
Assessment Year Demand raised u/s. 156 of the Act
1987-88 1,19,170/-
1988-89 5,53,774/-
1989-90 13,68,068/-
1990-91 23,57,128/-
1991-92 1,72,706/-
1992-93 13,21,156/-
1993-94 58,89,474/-
1994-95 29,75,306/-
1995-96 24,70,199/-
1996-97 15,21,293/-
1997-98 8,79,899/-
1998-99 1,37,122/-
Total:- 1,97,65,295/-
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5 Being aggrieved by the Assessment Orders for the Assessment
Years 1987-88 to 1998-99, Petitioner preferred Appeals before the
Commissioner of Income Tax (Appeals) (CIT(A)), who confirmed the
Assessment Orders and passed a consolidated order dated 9th October,
2002 for all the Assessment Years.
6 Further, appeals were preferred by Petitioner before the
Income Tax Appellate Tribunal (ITAT) and the ITAT set aside the order of
the CIT(A) by its order dated 20th August, 2004 and restored the issue
back to the file of the first Respondent- Assessing Officer.
7 It is submitted that pending the proceedings before the
CIT(A) and the ITAT, proceedings to recover the outstanding demands
were initiated by the Tax Recovery Officer (TRO) and to avoid any
coercive action, Petitioner handed over cheques totaling to an amount of
Rs.12,43,000/- from time to time to the TRO, which appears to be
pursuant to an order of stay of demand by the ITAT.
8 Petitioner submits that the said amount of Rs.12,43,000/-
was adjusted only against the demand for Assessment Year 1987-88 and
not for demands for the various Assessment Years 1987-88 to 1998-99.
This, according to the Petitioner, was despite the fact that, the original
demand for the Assessment Year 1987-88 was only Rs.19,170/- and,
therefore the entire amount of Rs.12,43,000/- could not have been
adjusted for the tax liability for that year alone.
9 It is submitted that, pursuant to the order dated 20th August,
2004, passed by the ITAT, Respondent No.1 passed the Assessment Order
on 13th March, 2006 under Section 143(3) of the Income Tax Act for the
Assessment Years 1987-88 to 1998-99 against which, Petitioner filed
appeals before CIT(A). Vide order dated 23rd November, 2006, the CIT(A)
granted partial relief to the Petitioner, pursuant to which, Respondent
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No.1 passed order on 23rd January, 2007, giving effect to the order passed
by the CIT(A). However, it is submitted that no credit for taxes paid on
regular assessment of Rs.15,86,151/- including Rs.12,43,000/- was given
while determining the demands for the respective years.
10 Being aggrieved by the partial relief granted by CIT(A),
Revenue filed appeals before the ITAT for Assessment Years 1988-89 to
1990-91 and 1992-93 to 1998-99, which were disposed of by order dated
18th December, 2008.
11 It is submitted that as the revised demand for Assessment
Year 1987-88 was only Rs.936/-, the payment of Rs.12,43,000/- has
been made to be adjusted against the revised demand for the Assessment
Years 1988-89 to 1998-99 as under:-
Assessment Year Disputed Tax (Amount in Rs.)
1988-89 3,122
1989-90 74,228
1990-91 96,577
1991-92 3,370
1992-93 46,971
1993-94 1,34,400
1994-95 1,48,535
1995-96 76,127
1996-97 75,555
1997-98 2,79,116
1998-99 17,432
Total:- 9,55,433/-
12 It is submitted that Petitioner filed rectification application
under Section 154 of the Income Tax Act for the Assessment Year 1987-88
to 1998-99, seeking credits for payments of Rs.15,86,151/- including
Rs.12,43,000/-, for adjustment of payments to the tune of Rs.12,43,000/-
against revised demand for the Assessment Year 1988-89 to 1998-99. This
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rectification application was decided on 16th April, 2018, rejecting the
request for the aforesaid adjustment as credit of tax as per challan was
given to the Petitioner for Assessment Year 1987-88. The Assessing Officer,
vide order dated 16th April, 2018 gave credit of the taxes paid of regular
assessment of Rs.15,86,151/- and determined the refund for Assessment
Year 1987-88 of Rs.23,64,620/-(including interest u/s. 244A of the
Income Tax Act of Rs.11,22,380/-) and total tax demand for Assessment
Year 1988-89 to Assessment Year 1998-99 of Rs.90,77,160/- (including
interest u/s 220(2) of the Income Tax Act of Rs.47,75,722/-).
13 Aggrieved by the same, Petitioner sought remedy by filing
Revision Application dated 15th May, 2018 under Section 264 of the
Income Tax Act before the Principal Commissioner of Income Tax to
compute the tax demand for Assessment Year 1987-88 to Assessment Year
1998-99 after giving credit of Rs.12,43,000/- for the Assessment Years
1988-89 to 1998-99, which has been adjusted in the impugned order
against Assessment Year 1987-88 only, and which is pending.
14 Learned Counsel for the Petitioner, Mr. K. Gopal, submits that
pending this application under Section 264 of the Income Tax Act, the
Direct Tax Vivad Se Vishwas Act, 2020 came to be enacted on 17th March,
2020 to reduce pending income tax litigations, generate timely revenue
for the Government and benefit tax payers by providing for peace of mind,
certainty and saving time and resources that would otherwise be spent on
the long drawn and vexatious litigation process. The Direct Tax Vivad Se
Vishwas Rules, 2020 (the “DTVSV Rules”) were notified on 19th March,
2020, pursuant to which, Petitioner has filed declaration in Form – 1 and
undertaking in Form-2 as per Rule 3 of the DTVSV Rules with the
Designated Authority viz: Respondent No.2 on 18th November, 2020.
Petitioner claims that he is an Appellant as per Section 2(1)(a)(v) of the
DTVSV Act, inasmuch as he is a person who has filed an application for
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revision under Section 264 of the Income Tax Act and the said
application is pending on the specified date viz: 31st January, 2020 as
defined in Section 2(1)(m) of the DTVSV Act. It is submitted that as
such he is an eligible Appellant as his application under Section 264 of
the Income Tax Act is pending on the specified date. He further submits
that in the Petitioner’s case, resolution of disputed tax has been
sought for. This he says is because as per Section 2(1)(j)(F) of the DTVSV
Act, “disputed tax” means the income tax (including surcharge and cess)
that would become payable by the Appellant under the provisions of
the Income Tax Act as computed in a case where an application for
revision under Section 264 of the Income Tax Act is pending as on the
specified date, was not to be accepted. He, therefore, submits that
Petitioner satisfies all the conditions to file declaration under Section 4 of
the DTVSV Act and has accordingly done so by filing declarations for
each of the Assessment Years 1988-89 to 1998-99.
15 Upon receipt of the said applications, Respondent No.1 sent a
mail on 3rd December, 2020 to the Petitioner, stating that there is no
dispute in income tax calculation and requested Petitioner to give a
working of the disputed tax in relation to undisputed income for
Assessment Years 1987-88 to 1998-99 within 3 days, failing which, the
applications would be processed, considering the ‘disputed tax’ in relation
to disputed income as “Nil”. Learned Counsel for Petitioner has taken us
through the said mail from the 1st Respondent, relevant portion of which
is extracted as under:-
“ Kindly refer to the above.
Received your application under DTVsV Scheme for above
mentioned assessment years. On perusal of the same, it is seen that
you have opted for the scheme since your revision petition u/s. 264
of the I. T. Act is pending before the Pr. C.I,T. 17 Mumbai for A Y
1988 – 89 to 1998-99. The main ground of appeal as per your
petition u/s. 264 of the I.T. Act is to direct the A. O. to give credit to
regular tax paid challan’s of A. Y. 1987-88 at Rs.12,43,000/- to
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various years i.e. for A. Y. 1988 to 1998 so that the interest u/s.
234B and 220(2) of the Act could be reduced considerably. There is
no dispute on the income arrived for A. Y. 1987 to 1998 in the
order passed u/s. 154 of the I. T. Act dated 16.04.2018 whereas in
your application in form – 1 Schedule X for A. Y. 1988 to 198
disputed income is shown nil, however, you have calculated
disputed tax. On perusal of the order passed u/s. 154 of the I. T. Act
and I.T. N. S-150 for A. Y. 1987 to 1998 dated 16-04-2108 it is seen
that Income Tax is correctly calculated, there is no dispute in
income tax calculation however you have mentioned disputed tax
against undisputed income in Form-1.
In view of the above, you are hereby given an opportunity to
submit your working of disputed tax in relation to undisputed
income for A. Y. 1987-88 to 1998-99 within 3 days from receipt of
the mail. If no reply is received within 3 days, your application for
DTVsV scheme will be processed accordingly considering the
disputed tax in relation to disputed income at Rs.Nil.”
16 In reply, Petitioner has filed a detailed submission dated 5th
December, 2020, which for the sake of convenience, is reproduced as
under:-
“ Submissions of the Applicant:
9. For the sake of convenience, the Applicant divides his
submissions into two parts as under:-
9.1 Submissions on the claims made by the Applicant in the said
application (Paragraph 10)
9.2 Submissions dealing with the specific queries raised by Your
Honour in the mail/ notice dated 03.12.2020 under consideration
(Paragraph 11)
10. The Applicant at the outset draws Your Honour’s attention to
the following definitions as mentioned u/s. 2 of the “the Act, 2020”
and submits as under:-
10.1. Section 2(1)(a)(v):- Section 2(1)(a) defines the terms
“appellant” and Section 2(1)(a)(v) as under:-
“person who has filed an application for revision under section 264
of the Income Tax Act and such application is pending on specified
date”
The Applicant submits that since his applications for revision for the
years under consideration are pending on specified date (i.e.
31.01.2020), the Applicant is an “appellant” as per the aforesaid
definition.
10.2 Section 2(1)(c) defines “declarant” as under:-
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“Declarant means a person who files declaration under Section 4”
Since the applicant has made valid declarations u/s. 4 r.w.s. 3 of the
“the Act, 2020”, the Applicant duly satisfies the aforesaid definition
as well.
10.3 Section 2(1)(d) defines declaration as “declaration” means
the declaration filed under Section 4.
The Applicant submits that since all the declarations are filed u/s.
3 r.w.s. 4 of the Act, 2020, the Applicant is required to be
considered as “declarant” under the scheme.
10.4 Section 2(1)(j)(f) defines ‘disputed tax’ in the case of
application for revision pending before 264 of the specified date
and it reads as under:-
“in a case where an application for revision under section 264 of
the Income Tax Act is pending as on the specified date, the amount
of tax payable by the Appellant if such application for revision
was not to be accepted.”
The Applicant mentions that his revision applications for the
aforesaid years are pending before the learned PCIT on 31.01.2020
and the Applicant would be liable to pay the total demand of
Rs.88,90,180/- (including the income tax of Rs. 8,06,968/-) if his
main contention of granting credit/ adjustment of taxes of
Rs.12,43,000/- against the revised demands of subsequent years
were not accepted and all the revision applications filed by the
Applicant were to be rejected. Thus, the Applicant humbly submits
the definition of “disputed tax” gets duly satisfied in the facts under
consideration. For the sake of easy reference, the Applicant makes a
following table depicting the quantum ‘disputed tax’ under
consideration separately year wise:
Assessment Years Disputed Tax (Amounts in Rs.)
1988-89 3,192/-
1989-90 74,228/-
1990-91 96,577/-
1991-92 3,370/-
1992-93 46,971/-
1993-94 1,34,400/-
1994-95 1,48,435/-
1995-96 76,127/-
1996-97 75,555/-
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1997-98 2,79,116/-
1998-99 17,432/-
10.1. Section 2(1)(a)(v):- Section 2(1)(a) defines the terms “appellant”
and Section 2(1)(a)(v) as under:-
“person who has filed an application for revision under section 264
of the Income Tax Act and such application is pending on specified
date”
The Applicant submits that since his applications for revision for the
years under consideration are pending on specified date (i.e.
31.01.2020), the Applicant is an “appellant” as per the aforesaid
definition.
10.5 Section 2(1)(o) of “the Act, 2020” defines tax arrears as
under:-
“(o) Tax arrears means,
(i) “The aggregate amount of disputed tax, interest chargeable
or charged on such disputed tax, and penalty leviable or levied on
such disputed tax”.
The Applicant submits that from the aforesaid table, it is discernible
that the amount / quantum of disputed tax is pending for all the
years under consideration and thus, the definition of “disputed tax”
duly gets satisfied in the present facts.
10.6 Now, proceeding further the Applicant draws Your
Honour’s attention to section 3 and section 4 of the Act, 2020 and
submits that a conjoint reading of both the sections lays down the
procedure to be adopted/ followed by a person/ declarant under
the scheme after satisfying the aforesaid eligible conditions. The
relevant parts of Section 3 and 4 of the Act, 2020 reads as under:-
Section 3: Subject to the provisions of this Act, where a
declarant files [under the provisions of this Act on or before such
date as may be notified], a declaration to the designated authority
in accordance with the provisions of Section 4 in respect of tax
arrears, then notwithstanding anything contained in the income tax
Act or any other law for the time being in force, the amount
payable by the declarant under this Act shall be as under, namely
(a) Where the tax arrears is the aggregate amount of disputed
tax, interest chargeable or charged on such disputed tax, and
penalty leviable or levied on such disputed tax”, in that case, the
amount payable under this Act shall be the amount of disputed
tax”.
Section 4 (1) The declaration referred to in section 3 shall be
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filed by the declarant before the designated authority in such form
and verified in such manner as may be prescribed.
10.7 From the aforesaid sections, the Applicant submits that
the applications filed by him under the scheme with the intention to
settle the dispute in relation to “disputed tax” for the years under
consideration are valid and thus, the Applicant requests the learned
competent authority (i.e. the learned PCIT) to process the said
applications and oblige.
11 Now, the Applicant specifically deals with the
objections raised by Your Honour in the mail/ reply dated 3rd
December, 2020. The relevant part of the said mail/ notice is
reproduced as under:
“ The main ground of appeal as per your petition u/s. 264 of
the I.T. Act is to direct the A. O. to give credit to regular tax paid
challan’s of A. Y. 1987-88 at Rs.12,43,000/- to various years i.e. for
A. Y. 1988 to 1998 so that the interest u/s. 234B and 220(2) of the
Act could be reduced considerably. There is no dispute on the
income arrived for A. Y. 1987-1998 in the order passed u/s. 154 of
the I. T. Act dated 16.04.2018 whereas in your application in form
1 schedule X. for A. Y. 1988 to 1998 disputed income is shown nil,
however, you have calculated disputed tax. On perusal of the order
passed u/s. 154 of the I. T. Act and I.T. N.S150 for A. Y, 1987 to
1998 dated 16.04.2018 it is seen that Income tax is correctly
calculated, there is no dispute in income tax calculation however
you have mentioned disputed tax against undisputed income in
Form-I.”
11.1 The Applicant at the outset submits that the aforesaid
objection is factually incorrect. From the facts narrated in the
applications filed u/s. 264 of the Act as well as the present
correspondence, it is clear that the Applicant has challenged the
inaction on the part of the learned AO, with regard to granting
credit of taxes of Rs.12,43,000/- paid by the Applicant. Thus, the
main dispute under consideration is “non-allowance of tax credit of
Rs.12,43,000/- for the relevant years.” The Applicant draws Your
Honour’s attention tot he specific prayers sought in his revision
applications which are self-explanatory and factually support the
aforesaid contention of the Applicant.
“Thus, the Applicant prays that your honours may be pleased to:
A. The Ld. A. O. may be directed to compute the tax demand for
A Y 1987-88 to A Y 1998-99 and demand may be raised after giving
credit of the taxes paid amounting to Rs.12,43,000/- which have
been adjusted in the impugned order against A Y 1987-88 only.
B. The Ld AO may be directed to compute the tax demand for
A Y 1987-88 to 1998-99 by restricting the charge of the interest
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u/s. 220(2) of the Act till October’ 2013.
C. That, your honours may be pleased to pass such further and
other order as the facts and circumstances of the case may require.”
In the light of the aforesaid submission, the Applicant submits that
it is incorrect to mention that the Applicant has raised only one
issue (i.e. the issue of computation of interest u/s. 234 and 220(2)
of the Act) in his revision applications for the years under
consideration. It is submitted that adjustment/ credit of taxes paid
on regular assessment is a statutory right of the Applicant/ assessee
and the same cannot be equated with or considered as “disputed in
relation to calculation of interest” merely on the fact that the issue
of tax credit has a consequential effect on the interest calculation.
Thus, the Applicant states that the first objection as raised by Your
Honour is contrary to the provisions of the Act.
11.2 In the said notice, Your Honour has observed that there
is no undisputed income in relation to disputed tax. On the said
observation, the Applicant submits that the scheme has nowhere
enunciated a pre-condition of existence of “disputed income” in
order to settle the quantum of disputed tax. It is pertinent to note
that the definition of disputed tax operated separately without
bearing any nexus with the quantum of disputed income. As
explained herein above, the disputed tax is computed by
considering tax which would be payable by an Applicant if his
appeal/ application u/s. 264 was to be rejected without having any
relevance of quantum of the disputed income involved in such an
appeal or a revision application. Even the scheme defines disputed
income in a reverse manner giving reference to the quantum of
disputed tax. The definition of disputed income mentioned u/s.
2(1)(g) of the “The Act, 2020” reads as under:-
“Disputed income” in relation to an assessment year, means the
whole or so much of the total income as is relatable to the disputed
tax.”
In the light of the aforesaid submission, the Applicant states that
the Applications preferred by him are in consonance with the
provisions of the Act, 2020 and requests Your Honour to process
the same.
12. Before closing the present submission, the Applicant clarifies
that he has not made any elaborate submissions on the merits of
the applications filed by him u/s. 264 of the Act and the present
submission is limited only to the aspect of the validity/ eligibility of
the Applicant’s application filed for the respective years under the
scheme. Further, the Applicant in order to avoid unnecessary
repetition of the documents which have already been attached to
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his revision applications prefer not to submit the same one more
time with the present submission. However, the Applicant mentions
that if Your Honour seeks any document/ clarification, the
Applicant shall be pleased to provide. In the view of the above, the
Applicant requests shall be pleased to provide. In the view of the
above, the Applicant requests Your Honour to accept his all
applications and process the same under the scheme.”
17 Thereafter, admittedly, an opportunity of personal hearing
was given to the Petitioner, wherein the aforesaid submissions were
reiterated. However, Respondent No.2 has rejected the applications by
updating the status on the e-filing portal of the Petitioner on 30th January,
2021, which according to the Petitioner, has been done in an arbitrary
manner without passing any order and without assigning any reason for
the same and, therefore, he prays that the 2nd Respondent be directed to
accept the Form-1 declarations filed by the Petitioner.
18 Learned Counsel for the Petitioner Mr. K. Gopal reiterates the
submissions made in the Petition and the Rejoinder as he purports to take
us through the provisions of Section 2(1)(a) of the DTVSV Act with
respect to the definition of “Appellant”. He submits as referred to herein
above earlier that pursuant to Section 2(1) (a)(v), in view of the
pendency of the Petitioner’s application for revision u/s. 264 of the
Income Tax Act, Petitioner is eligible Appellant. The said provision is
reproduced as under:-
“2 Definitions:- (1) In this Act, unless the context otherwise
requires – “(a) ‘appellant’ means –
(i) to (iv) …. …. ….. ….
(v) a person who has filed an application for revision under
section 264 of the Income Tax Act and such application is pending
as on the specified date.”
19 He also takes us to the definition of “disputed income” which
is defined in Section 2(1)(g), and which is quoted as under:-
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(g) “disputed income” in relation to an assessment year, means
the whole or so much of the total income as is relatable to the
disputed tax.”
20 He submits that, it is clear from the above definition that
disputed income is something which is relatable to the disputed tax and
not the other way round. He, submits that, therefore, the definition of
disputed tax in Section 2(1)(j) (F) becomes very much relevant. The same
is quoted as under:-
(j) “disputed tax” in relation to an assessment year or financial
year, as the case may be, means the income tax, including surcharge
and cess (hereafter in this clause referred to as the amount of tax)
payable by the appellant under the provisions of the Income Tax
Act, 1961 (43 of 1961), as computed hereunder:-
…. …. …. …. …. ….
…. …. …. …. …. ….
(F) in a case where an application for revision under section 264
of the Income Tax Act is pending as on the specified date, the
amount of tax payable by the appellant if such application for
revision was not to be accepted.”
21 He submits that the disputed tax in the case of Petitioner
would mean the amount of income tax including surcharge and cess
payable by the Appellant under the Income Tax Act, if the application for
revision u/s. 264 of the Act was not to be accepted. According to him, if
the Petitioner’s Revision Application for the Assessment Years 1988-89 to
1998-99, which are pending before the PCIT as on 31st January, 2020 are
rejected i.e. if the main contention of granting credit/ adjustment of taxes
of Rs.12,43,000/- against revised demands of subsequent years (i.e. not
including Assessment Year 1987-88) were not accepted, then Petitioner
would be liable to pay a total demand of Rs.88,90,180/- including income
tax, interest. Learned Counsel also draws our attention to Section 2(1)(o)
of the DTVSV Act, which defines tax arrear as under:-
“(o) Tax arrears means, –
(i) “The aggregate amount of disputed tax, interest chargeable
or charged on such disputed tax and penalty leviable or levied on
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such disputed tax.”.
22 He submits that considering that since the total amount of
demand upon rejection will have a substantial interest component u/s.
234B and 220(2) of the Income Tax Act, the definition of ‘tax arrears’ as
above also gets satisfied in the facts of the case. He, therefore submits that
it is not correct for the Revenue to say that there is no dispute in income
tax calculation. He would submit that there is disputed tax against the
income as declared in Form-1 and which is a subject matter of pending
Revision Application. Therefore, to say that the disputed income is ‘Nil’
is not correct. Referring to the 1st Respondent’s e-mail communication
dated 3rd December, 2020, he would submit that the main dispute under
consideration is disallowance of tax credit of Rs.12,43,000/- for the
relevant years and that it is incorrect to mention that same is being
done to considerably reduce interest u/s. 234 B and 220(2) of the Income
Tax Act. He submits that adjustment/credit of taxes paid on regular
assessment is a statutory right of the Applicant/ Assessee and the same
cannot be equated with or considered as ‘dispute in relation to calculation
of interest’ merely on the fact that the issue of tax credit has a
consequential effect on the interest calculation.
23 He would submit that by Petitioner’s reply dated 5th
December, 2020, it was explained as to how there was disputed tax and in
view of the definition of disputed tax as above, what is relevant is that,
there should be disputed tax, and disputed income, in the context of the
DTVSV Act, is to be determined on the basis of the disputed tax and not
the other way around. He submits that, therefore, the department has
grossly erred in rejecting the applications made under the DTVSV Act.
24 Mr. Gopal, learned Counsel for the Petitioner would submit
that Petitioner does not fall under section 4(6) nor within the
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disqualifications provided in Section 9 of the DTVSV Act, a fact which is
not disputed by the petitioner and, therefore, Respondent No.2 is not
justified in rejecting the declarations filed by Petitioner under Section 4(1)
of the DTVSV Act.
25 He also submits that the Respondent within the time period
prescribed under Section 5(1) of the Act i.e. within 15 days from the date
on which the declaration is filed, is required to determine disputed tax
payable under the DTVSV Act which may not be the same as declared by
the Petitioner in the Forms 1 and 2 but the Respondent has no jurisdiction
to reject the valid declaration filed by the Petitioner.
26 Mr. Gopal, learned Counsel for the Petitioner submits that the
object behind the enactment is to settle tax disputes and to reduce
litigation. The Act confers benefits upon tax payers, who can put an end
to the litigation by paying specified percentages of tax and obtain
immunity from penalty and prosecution and when Petitioner has come
forward and filed valid declarations, the Designated Authority instead of
issuing Form 3 u/s. 5 of the DTVSV Act has simply updated the portal on
30th January, 2021 with the remark “Rejected” which is not contemplated
in the scheme of the DTVSV Act.
27 He would, therefore, submit that this is a fit case for
interference by this Court and accordingly submits that the Petition as
prayed for, be allowed.
28 Per contra, the Revenue has filed its affidavit in reply where
it is admitted that Petitioner is an Appellant as per Section 2(1)(a)(v) of
the DTVSV Act. Further stating that the applications of the Petitioner
have not been rejected on that ground but on the ground that there is
no disputed tax.
29 Mr. Sham Walve, learned standing counsel for the Revenue
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seeks to rely upon and takes us through paragraphs 5, 8, 10, 11, 12 and
23 of the said reply. For the sake of convenience, the said paragraphs are
reproduced here under:-
“5:- I say that, as per the definition of “appellant” mentioned in
Sec.2(1)(a)(v) of The Direct Tax Vivad se Vishwas Act, 2020
(henceforth referred as DTVSV Act), the Petitioner is an appellant
under DTVSV Act. Also, the Petitioner’s case does not fall in any of
the categories mentioned in Section 9 of DTVSV Act. Hence, the
contention of the petitioner that he is an “appellant” under DTVSV
Act, is found to be correct and is not the reason for rejection of
application under DTVSV Act, made by the appellant.
8:- On perusal of order passed u/s. 154 of the Act, it is seen that
the Income Tax (Income Tax including cess and surcharge) is
correctly calculated in the case of petitioner and no dispute in
income tax calculation was raised. Further, it is noticed that the
primary ground raised in revision u/s. 264 of the Act, is to direct
the A.O. to give credit of regular taxes challan’s paid for A.Y. 1987-
88 of Rs.12,43,000/- to A. Ys. 1988-89 to 1998-99 so that interest
u/s. 234 B and 220(2) of the Act, could be reduced considerably.
Accordingly, appellant was asked as to why he has claimed
“disputed tax” in Form-1 of DTVSV Act even though there is no
disputed income in appellant’s case. To which the appellant replied
that ‘disputed tax’ u/s. 2(1)(j)(f) which provides that “in a case
where an application for revision u/s. 264 of the Act, is pending as
on specified date, the amount of tax payable by the appellant if
such application for revision was not to be accepted.”
The petitioner submitted that the revision application preferred u/s.
264 of the Act, is pending and the petitioner would be liable to
pay the total demand of Rs.88,90,180/- if the main contention
of granting credit of taxes of Rs.12,43,000/- against the revised
demand of subsequent years is not accepted and the revision
application filed by the petitioner is rejected. Thus, the definition
of ‘disputed tax’ gets duly satisfied in the facts under
consideration. The appellant had further submitted that it is
incorrect to mention that he has raised only one issue (i.e. the
issue of computation of interest u/s 234 and 220(2) of the Act, in
the revision application.
10:- From plain reading of Sec. 2(j)(F) of DTVSV Act, 2020 it is
clear that disputed tax means the income tax including surcharge
and cess. Nowhere in Sec. 2(j)(F) of DTVSV Act, 2020, it is
mentioned that disputed tax includes interest viz. 234A, B, C or
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220(2) of the Act, etc. or credit of challans given or to be given etc.
This definition of “disputed tax” as per Sec. 2(j)(F) of DTVSV Act,
2020 is emphasized upon solely for the reason that the declaration
of petitioner’s application under VSV Act, relates to the “disputed
tax”. There after, query was raised on account of “disputed tax”
against the Petitioner.
The Petitioner vide submission made on 05.12.2020 submitted
that the revision application preferred u/s. 264 of the Act, is
pending and the petitioner would be liable to pay the total
demand of Rs.88,90,180/- if the main contention of granting
credit of taxes Rs.12,43,000/- against the revised demand of
subsequent years is not accepted and the revision application filed
by the petitioner is rejected. Thus, the definition of “disputed tax”
gets duly satisfied in the facts under consideration.
11:- Careful perusal of the revision application u/s. 264 of the Act,
and the above reply of the assessee, revealed that the petitioner
has never contested against the income tax demand raised in order
u/s. 154 of the Act, tax (i.e. income tax, including surcharge and
cess) calculated thereon from A. Y. 1987-88 to 1998-99. However,
the only request or contention behind revision application made by
the assessee is to compute the tax demand for A. Y. 1987-88 to
1998-99 after giving credit of the taxes paid amounting to
Rs.12,43,000/- which have been adjusted against A. Y. 1987-88
only. Nowhere in the revision application u/s. 264 of the Act, has
the petitioner objected to the income tax demand (income tax
including surcharge and cess) raised by the AO for A. Ys. 1987-88
to 1998-99, in fact, he has only contended that the AO has treated
the tax payments made by the petitioner against disputed demands,
only against A. Y. 1987-88. Also, the AO determined the tax
demand of Rs.90,77,170/- of which principal tax demand is
Rs.10,50,699/- whereas balance is towards interest u/s. 234 of
Rs.32,40,483/- and interest u/s. 220(2) of the Act till 30.04.2018
(Rs.26,60,926). This reduction in demand is attributed to the fact
that as per orders dt. 18.04.2018 for A. Y. 1987-88, the interest
payable to the assesee u/s. 244A is calculated at 0.5% pm, whereas
interest u/s. 234B/ 220(2) is computed at 1% pm. This results into
the penalization of assesse, inspite of having paid taxes. In view of
the above stated facts, the assessee’ ground on which the appellant
was defending that he has satisfied the definition of “disputed tax”
as per DTVSV Act, is infructuous.
12:- I say that the petitioner under the revision petition u/s. 264
of the Act, has applied for waiver of interest u/s. 220(2) of the Act,
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even though the matter does not fall under the ambit of the
provisions of Sec. 264 of the Act. The revision petition u/s. 264 of
the Act cannot be a remedy for waiver of interest u/s. 220 (2) of
the Act. The petitioner for waiver of interest has to apply to the
appropriate authority and revision petition u/s. 264 of the Act
cannot be a route for waiver of interest u/s. 220(2) of the Act.
23:- With reference to paragraphs 3.10(iv) of the petition, I say
that the contention of the petitioner that definition of ‘tax arrears’
as per provisions of Sec.2(1)(o) of DTVSV Act, is satisfied is found
to be correct. In fact the petitioner himself if accepting the fact that
the disputed tax for A.Ys. 1988-89 to 1998-99 and tax arrears
implies to the same demand. For further clarity:
Disputed Tax – Income Tax including surcharge and cess-
Tax Arrears – Disputed tax plus interest and penalty leviable or
levied. Hence, the petitioner himself is contracting his statement
made in Para 3.10(iv) that he has satisfied the definition of
“disputed tax” as per Sec.2(1)(j)(F) of DTVSV Act, simply for the
fact that the “disputed tax” which the petitioner has declared in
application under DTVSV Act, is nothing but the “Tax Arrears” and
this is clear from petitioner’s explanations given in various
submissions and in this Para as well.”
30 The learned Counsel for the Revenue submits that there has
been no challenge by the Petitioner to the income tax demand and,
therefore, there is no disputed income nor disputed tax. Petitioner is only
seeking remedy of waiver of interest which cannot be by way of an
application under Section 264 of the Income Tax Act. He submits that
Petitioner is, therefore, not entitled to the reliefs claimed as rejections by
the designated authority are justified.
31 We have heard learned Counsel for the parties. We have also
with their assistance, perused the papers and proceedings in the matter as
well as the relevant provisions of the DTVSV Act as well as the DTVSV
Rules.
32 The basic facts set out above are not in dispute. Without
getting into the merits of the demands by the Revenue or the Application
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for Revision under Section 264 of the Income Tax Act by the Petitioner, it
would be relevant to note that, it is not in dispute that Petitioner had filed
application under Section 264 of the Income Tax Act for adjustment/credit
of Rs.12,43,000/-paid earlier in respect of the tax demands for
Assessment Years 1988-89 to 1998-99 as according to him, this amount
had been adjusted only against the demand for the A.Y 1987-88. While
this application was pending, the Direct Tax Vivad Se Vishwas Act, 2020
came to be enacted followed by Direct Tax Vivad Se Vishwas Rules, 2020.
Petitioner filed applications under the DTVSV Act and Rules vide
declarations in Form-1 dated 18th November, 2020 and waiver
undertakings in Form-2 for each of the 11 years for the period 1988-89 to
1998-99 to avail of beneficial tax payments to end the litigation with the
Revenue-Authorities. Pursuant to the filing of these applications, on 3rd
December, 2020, Respondent No.1 called upon the Petitioner to submit
working of disputed tax in relation to undisputed income for A.Y 1987-88
to 1998-99, stating that, Petitioner had mentioned disputed tax in the
Form-1 despite the disputed income shown as ‘Nil’ in the 154 proceedings,
tax having been calculated correctly for Assessment Years 1987 to 1998
and there being no dispute in income tax calculation and despite that, the
Petitioner had calculated disputed tax and filed the declarations under the
DTVSV Act. The main purpose of the application under section 264 of the
Income Tax Act being only to considerably reduce the interest under
Sections 234-B and 220(2) of the Income Tax Act by seeking to adjust the
credit of regular tax paid challans for Assessment Year 1987-88 of
Rs.12,43,000/- to various years i.e. to Assessment Years 1988-89 to
1998-99 even though Petitioner would be liable to pay a total demand of
Rs.88,90,180/- including a large interest component if the revision
application under section 264 was to be rejected.
33 The issue really is whether Petitioner satisfies the definition of
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‘disputed tax’ as contained in the DTVSV Act and Rules so as to be
considered to have filed a valid declaration in Form-1 and waiver
undertaking in Form-2. Going by the above submission and the definition
of disputed tax as contained in section 2(1)(j)(F) of the DTVSV Act as
contended by the Petitioner, it appears from the facts that the Petitioner
would fall within the said definition. We find merit in the submissions
made on behalf of the Petitioner.
34 It would, therefore be apposite to refer to the legislative
background of the DTVSV Act. For this purpose, firstly, the relevant
portion of the budget speech of the Hon’ble Finance Minister made on 1st
February, 2020 is quoted as under:-
“Sir, in the past our government has taken several measures
to reduce tax litigations. In the last budget, Sabka Vishwas Scheme
was brought in to reduce litigation in indirect taxes. It resulted in
settling over 1,89,000 cases. Currently, there are 4,83,000 direct tax
cases pending in various appellate forms i.e. Commissioner
(Appeals). ITAT, High Court and Supreme Court. This year, I
propose to bring a scheme similar to the indirect tax Sabka Vishwas
for reducing litigations even in the direct taxes.
Under the proposed ‘Vivad se Vishwas’ scheme, a taxpayer
would be required to pay only the amount of the disputed taxes and
will get complete waiver of interest and penalty provided the pays
by 31st March, 2020. Those who avail this scheme after 31st March,
2020 will have to pay some additional amount. The scheme will
remain open till 30th June, 2020.
Taxpayers in whose case appeals are pending at any level can
benefit from this scheme.
I hope that taxpayers will make use of this opportunity to get
relief from vexatious litigation process.”
35 Thus, what was intended by the Hon’ble Finance Minister was
to bring a scheme similar to the Sabka Vishwas (Legacy Dispute
Resolution) Scheme, 2019 which pertained to indirect taxes. The object of
the Vivad se Vishwas Scheme is to reduce litigations in direct taxes, where
the tax payer would have to pay disputed tax.
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36 Also, the statement of objects and reasons for bringing the
said legislation, reads as under:-
“ Over the years, the pendency of appeals filed by taxpayers as
well as Government has increased due to the fact that the number
of appeals that are filed is much higher than the number of appeals
that are disposed. As a result, a huge amount of disputed tax
arrears is locked-up in these appeals. As on the 30th November,
2019, the amount of disputed direct tax arrears is Rs.9.32 lakh
crores. Considering that the actual direct tax collection in the
financial year 2018-19 was Rs.11.37 lakh crores, the disputed tax
arrears constitute nearly one year direct tax collection.
2 Tax disputes consume copious amount of time, energy and
resources both on the part of the Government as well as taxpayers.
Moreover, they also deprive the Government of the timely collection
of revenue. Therefore, there is an urgent need to provide for
resolution of pending tax disputes. This will not only benefit the
Government by generating timely revenue but also the taxpayers
who will be able to deploy the time, energy and resources saved by
opting for such dispute resolution towards their business activities.
3 It is, therefore, proposed to introduce the Direct Tax Vivad se
Vishwas Bill, 2020, for dispute resolution related to direct taxes,
which, inter alia, provides for the following namely:-
(a) the provisions of the Bill shall be applicable to appeals filed
by tax payers or the Government, which are pending with the
Commissioner (Appeals), Income Tax Appellate Tribunal, High
Court or Supreme Court as on the 31st day of January, 2020
irrespective of whether demand in such cases is pending or has
been paid;
(b) the pending appeal may be against disputed tax, interest or
penalty in relation to an assessment or reassessment order or
against disputed interest, disputed fees where there is no disputed
tax. Further, the appeal may also be against the tax determined on
defaults in respect of tax deducted at source or tax collected at
source.
(c) in appeals related to disputed tax, the declarant shall not pay
the whole of the disputed tax if the payment is made before the 31st
day of March, 2020 and for the payments made after the 31st day of
March, 2020 but on or before the date notified by Central
Government, the amount payable shall be increased by 10 per cent
of disputed tax.
(d) in appeals related to disputed penalty, disputed interest or
disputed fee, the amount payable by the declarant shall be 25 per
cent of the disputed penalty, disputed interest or disputed fee, as
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the case may be if the payment is made on or before the 31st day of
March, 2020. If payment is made after 31st day of March, 2020 but
on or before the date notified by Central Government, the amount
payable shall be increased to 30 per cent of the disputed penalty,
disputed interest or disputed fee, as the case may be.
4 The proposed Bill shall come into force on the date it receives
the assent of the President and declaration may be made thereafter
up to the date to be notified by the Government.”
37 It therefore emerges that the DTVSV Act has been enacted to
address the urgent need to provide for resolution of pending tax disputes
where a huge amount of disputed tax arrears of over Rs.9.32 lakh crores is
locked-up. The DTVSV Act is aimed not only to benefit the Government by
generating timely revenue but also to benefit the taxpayers by providing
them peace of mind, certainty and saving time and resources rather than
spending the same otherwise, enabling the taxpayers to be able to deploy
the time, energy and resources saved, by opting for such dispute
resolution, towards their business activities. The Act confers benefit on the
tax payers who can put an end to tax litigation by paying specified
percentage of tax and obtain immunity from penalty and prosecution and
waiver of interest. In the context of the issue at hand, it would be
pertinent to refer to the preamble to the DTVSV Act.
38 The preamble clearly provides that this is an Act to provide
for resolution of disputed tax and for matters connected therewith or
incidental thereto. The emphasis is on disputed tax and not on disputed
income.
39 Also for the purpose of our discussion, it would be pertinent
to set forth the following provisions of the DTVSV Act.
“2. Definitions – (1) In this Act, unless the context otherwise
requires –
(a) ‘appellant’ means-
(i) a person in whose case an appeal or a writ petition or special
leave petition has been filed either by him or by the income-tax
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authority or by both, before an appellant forum and such appeal or
petition is pending as on the specified date;
(ii) to (iv) …. …. …. …. …. …. …. ….
(v) a person who has filed an application for revision under
section 264 of the Income tax and such application is pending as on
the specified date.”
“(g) – disputed income – in relation to an assessment year, means
the whole or so much of the total income as is relatable to the
disputed tax.”
“(j) ‘disputed tax’, in relation to an assessment year or financial
year, as the case may be, means the income tax, including surcharge
and cess (hereafter in this clause referred to as the amount of tax)
payable by the appellant under the provisions of the Income tax
Act, 1961 (43 of 1961), as computed hereunder:-
(A) in a case where any appeal, writ petition or special leave
petition is pending before the appellate forum as on the specified
date, the amount of tax that is payable by the appellant if such
appeal or writ petition or special leave petition was to be decided
against him;
(B) in a case where an order in an appeal or in writ petition has
been passed by the appellate forum on or before the specified date,
and the time for filing appeal or special leave petition against such
order has not expired as on that date, the amount of tax payable by
the appellant after giving effect to the order so passed;
(C) in a case where the order has been passed by the Assessing
Officer on or before the specified date, and the time for filing
appeal against such order has not expired as on that date, the
amount of tax payable by the appellant in accordance with such
order;
(D) in a case where objection filed by the appellant is pending
before the Disputed Resolution Panel under section144C o the
Income-tax Act as on the specified date, the amount of tax payable
by the appellant if the Disputed Resolution Panel was to confirm the
variation proposed in the draft order;
(E) in a case where Disputed Resolution Panel has issued any
direction under sub-section (5) of section 144C of the Income-tax
Act and the Assessing Officer has not passed the order under subsection
(13) of that section on or before the specified date, the
amount of tax payable by the appellant as per the assessment order
to be passed by the Assessing Officer under sub-section (13)
thereof;
(F) in a case where an application for revision under section 264
of the Income-tax Act is pending as on the specified date, the
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amount of tax payable by the appellant if such application for
revision was not to be accepted.”
(o) tax arrear means –
(i) the aggregate amount of disputed tax, interest chargeable or
charged on such disputed tax, and penalty leviable or levied on
such disputed tax; or
(ii) disputed interest ; or
(iii) disputed penalty; or
(iv) disputed fee.”
40 Section 3 with respect to the tax amount payable by declarant
also assumes significance and is quoted hereunder:-
“3:- Amount payable by declarant:- Subject to the provisions of
this Act, where a declarant files under the provisions of this Act on
or before the last date, a declaration to the designated authority in
accordance with the provisions of section 4 in respect of tax arrear,
then, notwithstanding anything contained in the Income-tax Act or
any other law for the time being in force, the amount payable by
the declarant under this Act shall be as under, namely:-
Sl.
No.
Nature of tax appear Amount payable
under this Act on or
before 31st day of
March, 2020
Amount payable under
this Act on or after the 1st
day of April, 2020 but on
or before the last date.
(a) Where the tax arrear is the
aggregate amount of disputed
tax, interest chargeable or
charged on such disputed tax
and penalty leviable or levied
on such disputed tax.
Amount of the
disputed tax
The aggregate of the
amount of disputed tax
and ten per cent of
disputed tax; provided
that where the ten per
cent of disputed tax
exceeds the aggregate
amount of interest
chargeable or charged on
such disputed tax and
penalty leviable or levied
on such disputed tax, the
excess shall be ignored
for the purpose of
computation of amount
payable under this Act.
(b) Where the tax arrear includes
the tax, interest or penalty
determined in any assessment
on the basis of search under
section 132 or section 132A
of the Income Tax Act,
The aggregate of the
amount of disputed
tax, and twenty five
per cent of the
disputed tax; provided
that where the twentyfive
per cent of
The aggregate of the
amount of disputed tax
and thirty-five percent of
disputed tax; provided
that where the thirty-five
per cent of disputed tax
exceeds the aggregate
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disputed tax exceeds
the aggregate amount
of interest chargeable
or charged on such
disputed tax and
penalty leviable or
levied on such
disputed tax, the
excess shall be
ignored for the
purpose of
computation of
amount payable under
this Act.
amount of interest
chargeable or charged on
such disputed tax and
penalty leviable or levied
on such disputed tax, the
excess shall be ignored
for the purpose of
computation of amount
payable.
(c) Where the tax arrear relates
to disputed interest or
disputed penalty or disputed
fee
Twenty-five per cent
of disputed interest or
disputed penalty or
disputed fee.
Thirty-five per cent of
disputed interest or
disputed penalty or
disputed fee.
Provided that in a case where an appeal or writ petition or
special leave petition is filed by the income-tax authority on any
issue before the appellate forum, the amount payable shall be onehalf
of the amount in the table above calculated on such issue, in
such manner as may be prescribed:
Provided further that in a case where an appeal is filed before
the Commissioner (Appeals) or objections is filed before the
Dispute Resolution Panel by the appellant on any issue on which he
has already got a decision in his favour from the Income-tax
Appellate Tribunal (where the decision on such issue is not reversed
by the High Court or the Supreme Court) or the High Court (where
the decision on such issue is not reversed by the Supreme Court),
the amount payable shall be one-half of the amount in the table
above calculated on such issue, in such manner as may be
prescribed:
Provided also that in a case where an appeal is filed by the
appellant on any issue before the Income-tax Appellate Tribunal on
which he has already got a decisions in his favour from the High
Court (where the decision on such issue is not reversed by the
Supreme Court), the amount payable shall be one-half of the
amount in the table above calculated on such issue, in such manner
as may be prescribed.”
Counsel for the parties submit that the date in the second
column is now 30th day of April, 2021 instead of 31st day of March, 2020.
41 Sections 4 and 5 read as under:-
“4. (1) The declaration referred to in section 3 shall be filed by
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the declarant before the designated authority in such form and
verified in such manner as may be prescribed.
(2) Upon the filing the declaration, any appeal pending before the
Income Tax Appellate Tribunal or Commissioner (Appeals), in
respect of the disputed income or disputed interest or disputed
penalty or disputed fee and tax arrear shall be deemed to have been
withdrawn from the ate on which certificate under sub-section (1)
of section 5 is issued by the designated authority.
(3) Where the declarant has filed any appeal before the appellate
forum or any writ petition before the High Court or the Supreme
Court against any order in respect of tax arrear, he shall withdraw
such appeal or writ petition with the leave of the Court wherever
required after issuance of certificate under sub-section (1) of
section 5 and furnish proof of such withdrawal along with the
intimation of payment to the designated authority under subsection
(2) of section 5.
(4) Where the declarant has initiated any proceeding for
arbitration, conciliation or mediation, or has given any notice
thereof under any law for the time being in force or under any
agreement entered into by India with any other country or territory
outside India whether for protection of investment or otherwise, he
shall withdraw the claim, if any, in such proceedings or notice after
issuance of certificate under sub-section (1) of section 5 and furnish
proof of such withdrawal along with the intimation of payment to
the designated authority under sub-section (2) of section 5.
(5) Without prejudice to the provisions of sub-sections (2), (3) and
(4), the declarant shall furnish an undertaking waiving his right,
whether direct or indirect, to seek or pursue any remedy or any
claim in relation to the tax arrear which may otherwise be available
to him under any law for the time being in force, in equity, under
statute or under any agreement entered into by India with any
country or territory outside India whether for protection of
investment or otherwise and the undertaking shall be made in such
form and manner as may be prescribed.
(6) The declaration under sub-section (1) shall be presumed never
to have been made if,-
(a) any material particular furnished in the declaration is
found to be false at any stage;
(b) the declarant violates any of the conditions referred to in
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this Act;
(c) the declarant acts in any manner which is not in
accordance with the undertaking given by him under subsection(
5),
and in such cases, all proceedings and claims which were
withdrawn under section 4 and all the consequences under the
Income Tax Act against the declarant shall be deemed to have been
revived.
(7) No appellate forum or arbitrator, conciliator or mediator shall
proceed to decide any issue relating to the tax arrear mentioned in
the declaration in respect of which an order has been made under
sub-section (1) of section 5 by the designated authority or the
payment of sum determined under that section.
5.(1) The designated authority shall, within a period of fifteen days
from the date of receipt of the declaration, by order, determine the
amount payable by the declarant in accordance with the provisions
of this Act and grant a certificate to the declarant containing
particulars of the tax arrear and the amount payable after such
determination, in such form as may be prescribed.
(2) The declarant shall pay the amount determined under subsection
(1) within fifteen days of the date of receipt of the
certificate and intimate the details of such payment to the
designated authority in the prescribed form and thereupon the
designated authority shall pass an order stating that the declarant
has paid the amount.
(3) Every order passed under sub-section (1), determining amount
payable under this Act, shall be conclusive as to matters stated
therein and no matter covered by such order shall be reopened in
any other proceeding under the Income Tax Act or under any other
law for the time being in force or under any agreement, whether for
protection of investment or otherwise, entered into by India with
any other country or territory outside India.”
42 Under the provisions of this Act, tax payers have been given
an option to settle their tax disputes by making a declaration to
designated authority and paying specified percentage of disputed tax as
per section 3 of the DTVSV Act.
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43 Section 3 of the DTVSV Act provides that where a declarant
files a declaration to the designated authority in accordance with the
provisions of section 4 in respect of tax arrears, the amount payable
would be the amount of disputed tax as is applicable in the cases referred
to in the table in the said section. Under section 4, the form of declaration
and the particulars to be furnished before the designated authority are
provided for. Rules stipulate that declaration has to be filed in Form-1
under section 4(1) of the Act read with Rule 3(1) of the Rules. Also an
undertaking in Form-2 under section 4(5) of the Act read with Rule 3(2)
of the Rules is to be filed by appellant under the Act, which admittedly has
been filed by the petitioner.
44 It is stated in section 4 (5) that, declarant is to furnish an
undertaking waiving his right to seek or pursue any remedy or claim in
relation to the tax arrears which may be available to him in law or equity
under statute or under any agreement.
45 It is also stated in section 4(6) that declaration under sub
section 1 shall be presumed never to have been made if-
(a) any material particular(s) furnished in the declaration, is
found to be false at any stage;
(b) the declarant violates any of the conditions referred to in the
Act;
(c) the declarant acts in any manner which is not in accordance
with the undertaking given by him under sub section (5)
and in such cases, all the proceedings and claims which were
withdrawn under section 4 and all the consequences under the
Income Tax Act against the declarant shall be deemed to have been
revived.
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46 Section 9 specifies the matters in respect of which the DTVSV
Act shall not apply, such as where the tax arrears in respect of which, the
disputed tax amount exceeds Rs.5 crores in respect of assessments made
under section 143(3) or 144 or 153-A or 153-C on the basis of search
initiated under Section 132 or 132-A or if on or before the date of filing of
the declarations, the tax arrears relates to an assessment year in respect of
which prosecution has been instituted or if it relates to un-disclosed
income or the source located out side India or un-disclosed asset located
out side India or it relates to assessment or re-assessment made on the
basis of information received under the agreement refers to in section 90
or section90-A of the Income Tax Act, in relation to any tax arrears, or to
persons in respect of whom detentions have been made under COFEPOSA
Act, 1974 or in respect of prosecutions for any offence under UAPA, 1967,
NDPS 1985, Prevention of Corruption Act, 1988, PMLA 2002, Prohibition
of Benami Property Transaction Act, 1988 or such persons have been
convicted of any such offences punishable under those Acts or to any
person in respect of whom prosecution has been initiated by an income
tax authority for an offence punishable under the Indian Penal Code or for
the purposes of enforcement of any civil law under Section 3 of the
Special Court (Trial and offence relating to transaction in securities) Act,
1992 etc.
47 It would also pertinent to quote the following provisions from
the Direct Tax Vivad se Vishwas Rules 2020 (DTVSV Rules):-
“2. Definition – In these rules, unless the context otherwise
requires-
(b) ‘dispute’ means appeal, writ or special leave petition
filed or appeal or special leave petition to be filed by the declarant
or the income-tax authority before the Appellate Forum, or
arbitration, conciliation or mediation initiated or given notice
thereof, or objections filed on or to be filed under Section 264 of
the Income-tax Act.”
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“3. Form of declaration and undertaking:- (1) The declaration
under sub-section (1) of section 4 shall be made in Form-1 to the
designated authority.
(2) The undertaking referred to in sub-section (5) of section 4
shall be furnished in Form-2 along with the declaration.
(3) The declaration under sub-rule (1) and the undertaking
under sub-rule (2), as the case may be, shall be signed and verified
by the declarant or any person competent to verify the return of
income on his behalf in accordance with section 140 of the Incometax
Act,1961.
(4) The designated authority on receipt of declaration shall issue
a receipt electronically in acknowledgment thereof.”
“4. Form of certificate by designated authority:- The designated
authority shall grant a certificate electronically referred to in subsection
(1) of section 5 in Form 3.
7. Order by designated authority – the order by the designated
authority under sub-section (2) of section 5, in respect of payment
of amount payable by the declarant as per certificate granted under
sub-section (1) of section 5, shall be in Form-5.”
48 From the above exposition, what emerges is that for a
declarant to file a valid declaration, there should be disputed tax in the
case of such a declarant. As can be seen from the aforesaid undisputed
fact that Petitioner having filed revision application under Section 264 of
the Income Tax Act for the Assessment Years 1988-89 to 1998-99 for
credit/ adjustment of Rs.12,43,000/- which application is pending before
the Commissioner. Petitioner, admittedly being an eligible Appellant,
squarely satisfies the definition of “disputed tax” as contained in Section
2(1) (j)(F) of the DTVSV Act, 2020. This is because, if the revision
application under Section 264 of the Income Tax Act is rejected, then the
Petitioner would purportedly be liable to pay a demand of Rs.88,90,180/-
including income tax, interest. Petitioner as eligible Appellant has filed
declaration under section 4 with the designated authority under the
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provisions of Section 4 of the DTVSV Act in respect of tax arrears which
include the disputed tax which will become payable as may be determined
by designated authority under Section 3. A look at definition of ‘tax
arrears’ clearly refers to an aggregate of the amount of disputed tax,
interest chargeable or charged on such disputed tax etc. determined
under the provisions of Income Tax Act.
49 We are of the view that this is not only a case where there is a
disputed tax but also tax arrears as referred to in section 3 of the DTVSV
Act. The respondents have not raised any objection under any provision
of the DTVSV Act or DTVSV Rules with respect to the declarations or
undertakings furnished by the Petitioner nor have they passed any order
let alone a reasoned or speaking order rejecting the said declarations. The
Respondents have summarily rejected the declarations without their being
any such provision in the DTVSV Act or the Rules. There also does not
appear to be any fetter on the Designated Authority to determine disputed
tax of an amount other than that declared by the petitioner.
50 From a plain reading of the provisions of the DTVSV Act and
the Rules set out above, it emerges that the Respondent- Designated
Authority would have to issue Form-3 as referred to in Section 5 (1)
specifying the amount payable in accordance with section 3 of the DTVSV
Act in the case of declarant who is an eligible appellant not falling under
section 4(6) nor within the exceptions in section 9 of the DTVSV Act,
which fact appears to be undisputed. As also observed by us earlier, the
case of the Petitioner would be covered by the definition of disputed tax
as per Section 2(1)(j)(F) of the DTVSV Act. It has to be kept in mind in
view of what has been observed by us earlier, that the DTVSV Act is a
beneficial legislation for both the Revenue and the tax payer.
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51 In view of the aforesaid discussion, we are of the view that
the Designated Authority under the DTVSV Act viz Respondent No.2 in
this case is not justified in rejecting the declarations filed by the Petitioner.
52 Accordingly, we set aside the rejections. We direct the
Respondent No.2 to consider the applications made by Petitioner by way
of declarations dated 18th November, 2020 in Form-1 as per law and
proceed with according to the scheme of the DTVSV Act and Rules in the
light of above discussion within a period of two weeks from the date of
this order.
53 Petition is allowed in the above terms. No order as to costs.
54 Parties to act on an ordinary copy of this order duly
authenticated by the Associate of this Court.
(ABHAY AHUJA,J.) (SUNIL P. DESHMUKH,J.)
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